- (1.) M/s. Shendra Green Energy Limited (SGEL) has filed a Petition on 7 March, 2014 under Sections 62(1) and (4), 86 (1)(a) to (c), (e) and (f) of the Electricity Act (EA), 2003 read with Regulations 8, 75 and 77 of the MERC (Terms and Conditions for Determination of Renewable Energy (RE) Tariff) Regulations, 2010 seeking, inter -alia, redetermination of tariff in respect of power supplied from its 13 MW biomass based plant to the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL).
(2.) SGEL's prayers are as follows: "a) redetermine cost ­ plus tariff in respect of renewable energy supplied by the Petitioner from its 13 MW biomass based plant to MSEDCL; b) direct MSEDCL to execute an amendment to the PPA dated 12.10.2006, so as to reflect the revised tariff determined by this Hon'ble Commission; c) exercise its power under Regulation 75 of the MERC (Terms and Conditions for Determination of RE Tariff) Regulations, 2010 and undertake project - specific determination of tariff for Petitioner's biomass power plant; d) alternatively, discharge the Petitioner from the PPA dated 12.10.2006, signed with MSEDCL; e) pass such other order(s), as this Hon'ble Commission may deem fit and proper in the facts and circumstances of the case."
(3.) The facts as stated in the Petition are as follows: 3.1 SGEL owns and operates a 13 MW biomass fuel based power plant at Shendra MIDC Industrial Area, Village Shendra, Dist. Aurangabad. SGEL has signed a biomass energy Power Purchase Agreement (PPA) with MSEDCL on 12 October, 2006. 3.2 Vide Order dated 8 August, 2005 in Case No. 37 of 2003, the Commission fixed the applicable Tariff and provided for an overall dispensation for procurement of power from biomass based generating projects. In particular, the Commission fixed a normative capital cost of Rs. 4 crore per MW, which was to remain applicable up to 31 March, 2010 or until commissioning of 250 MW of biomass based generation capacity in the State, whichever would be earlier. SGEL submits that the freeze on capital cost does not factor in the inflation that would impact capital cost for setting up a biomass project. 3.3 For biomass power projects commissioned during FY 2008 -09, some other State Regulatory Commissions have considered capital cost in the range of Rs. 4.25 to 4.87 crore/MW. Moreover, the Central Electricity Regulatory Commission (CERC), in the CERC (Terms and Conditions for Tariff determination from RE Sources), 2009, had notified a capital cost of Rs. 4.50 cr/MW for biomass projects to be commissioned during FY 2009 -10. 3.4 SGEL's 13 MW project, which was commissioned on 28 November, 2008, incurred a capital cost of Rs. 5.13 cr/MW. However, for the purpose of tariff, SGEL's capital cost was calculated as Rs. 4 cr/MW as per the Commission's Order dated 8 August, 2005. As per that Order, SGEL was paid a tariff of Rs. 3.25/kWh comprising fixed charge of Rs. 1.70/kWh and variable charge of Rs. 1.55/kWh for power supplied to MSEDCL. 3.5 The fixed charge component of tariff determined by the Commission is not sufficient to meet the fixed cost of SGEL's biomass plant, and may be increased on the basis of actual capital cost. 3.6 Vide Order dated 25 March, 2009 in the Petition filed by the Maharashtra Biomass Energy Developers Association (MBEDA) seeking review of the variable charge component, the Commission had revised the variable charge component of the biomass tariff to Rs. 2.58/kWh, with effective tariff of Rs. 4.28/kWh. Subsequently, the Commission, vide Order dated 14 December, 2009 in Case No. 83 of 2008, further enhanced the variable charge component to Rs. 3.28/kWh from the date of that Order up to 31 March, 2010. However, the fixed charge component of tariff was unaltered, and biomass projects became entitled to a tariff of Rs. 4.98/kWh. 3.7 The subsequent MERC (Terms and Conditions for determination of RE Tariff) Regulations, 2010 are applicable to all new RE projects to be commissioned in Maharashtra for generation and sale of electricity to Distribution Licensees within the State from the date of notification of the Regulations. With respect to tariff of existing RE projects, these Regulations provide as follows: "3.2 In case of existing RE projects, applicable tariff and other terms and conditions, shall be governed by respective RE Tariff Orders and amendments thereof as issued from time to time by the Commission and the tariff, tariff structure and other conditions as specified under respective RE Tariff Order shall continue to be applicable for such existing RE projects over the duration of the Tariff Period as stipulated under respective RE Tariff Orders." 3.8 Further, in terms of Regulation 3.3, vide Order dated 14 July, 2010 in Case No. 20 of 2010 the Commission fixed a tariff of Rs. 4.98/kWh for both existing and new biomass generators for FY 2010 -11. The same tariff was retained by the Commission for FY 2011 -12 vide Order dated 29 April, 2011 in Case No. 39 of 2011. Regulation 3.3 reads as follows: "3.3 For existing and new projects based on renewable energy technologies having fuel cost component, like biomass power projects and non -fossil fuel based co -generation projects, the tariff, tariff structure and other conditions as specified under respective RE Tariff Order shall continue to be applicable for first three years of the Control Period, i.e., FY 2010 -11, FY 2011 -12 and FY 2012 - 13." 3.9 Even though the tariff of Rs. 4.98/kWh was to remain applicable for FY 2012 -13, the Commission took cognizance of the increase in procurement price of biomass fuel and, vide Order dated 30 March, 2012 in Case No. 10 of 2012, fixed the tariff of Rs. 5.41/kWh, comprising variable charge component of Rs. 3.71 and fixed charge component of Rs. 1.70/kWh for both existing and new biomass power projects for FY 2012 -13. Further, vide Order dated 22 March, 2013 in Case No. 6 of 2013, the Commission determined the variable charge component at Rs. 4.01/kWh. However, the fixed charge component of Rs. 1.70/kWh was linked to the first year of operation as per tariff Order dated 8 August, 2005. SGEL is being currently paid a tariff of Rs. 5.55/kWh (Rs. 1.54/kWh - fixed charge component during the 5th year of a plant's operation, and Rs. 4.01/kWh ­ variable charge component). 3.10 In the proceedings of Case No. 6 of 2013, it was submitted by biomass generators that the capital cost of setting up biomass projects should be enhanced in view of the significant increase in capital expenditure required for setting up a biomass project. The developers' plea for enhancement of capital cost and SGEL's plea for revision of interest on working capital, gross station heat rate (SHR), gross calorific value (GCV), etc. were rejected by the Commission on the ground that the revision of the normative capital cost and the above parameters were not the subject matter of those proceedings. 3.11 The normative parameters assumed by the Commission in its Order dated 8 August, 2005 are not aligned with actual operating parameters that can be achieved at the optimum level of operating efficiency. Therefore, in exercise of its powers under Regulation 75 and 77 of RE Tariff Regulations, 2010, the Commission needs to revisit the various normative parameters such as SHR, GCV, Capital Cost, O and M expenses and MAT, etc. in the light of operational experience and market behavior over the last eight years since the passing of the Order dated 8 August, 2005. 3.12 In its Order dated 8 August, 2005, the Commission acknowledged that the Station Heat (SHR) is a key performance parameter which depends on plant capacity, plant design and configuration, technology, plant operation practices, maintenance philosophy adopted, quality of fuel received and operational performance over varying load conditions. However, inspite of these diverse factors, the Commission fixed a normative uniform SHR of 3650 kcal/ kWh on the basis of indicative fuel consumption considering indicative DPRs submitted by MBEDA which proved to over optimistic in actual operation. The Central Electricity Authority ( CEA) report of 2005 arrived at a normative SHR of 4500 Kcal/ kWh considering operational uncertainties and degradation of biomass on account of weather conditions, evaporation, etc. The National Productivity Council (NPC) has also found the SHR to be higher. The Central Electricity Regulatory Commission in its RE Tariff Regulations has considered a normative SHR of 4000 kCal/kWh. 3.13 The CEA report recommends average Gross Calorific Value (GCV) of 3300 kCal/ kg for biomass plants. NPC's field trials found the actual GCV of diverse biomass fuel between the range of 3090 Kcal/ kg to 3531 kcal/ kg. In view of uncertainty regarding quantity and quality of biomass fuel and field studies by expert bodies, SGEL seeks that the Commission fix normative GCV between 3100 Kcal/ kg to 3300 Kcal/ kg. 3.14 The Commission has considered Operation and Maintenance (O &M) expenses as 4% of normative capital cost during the first year of operation, to be escalated at a compounded rate of 5% per annum. The O and M expenses are linked to the capital cost, which is fixed at Rs. 4 Crs/ MW. The capital cost of projects commissioned in 2008 -09 is higher than Rs. 4 Cr/ MW, but the O&M expenses are worked out on the basis of Rs. 4 Cr/ MW. SGEL seeks that O&M expenses of Rs. 24 lakhs/ MW be allowed for FY 2012 -13, with annual escalation at the rate of 5.72%, in line with the CERC RE Tariff Regulations. 3.15 The Commission had considered the MAT at the rate of 8.415% in its Order dated 8 August, 2005. The present rate of MAT is 20.008%. As per CERC RE Tariff Regulations, all taxes and duties imposed by the Government are allowed as pass through on actually incurred basis. 3.16 Under Section 62(4) and other provisions of the EA 2003, the Commission has the powers and regulatory mandate to revise a tariff in the light of the prevailing cost environment. The current tariff applicable to SGEL's biomass plant neither serves to promote generation of renewable power nor ensure recovery of cost of electricity. In order to ensure generation of electricity on commercial principles, there is an urgent need for redetermination of the cost -plus biomass tariff. ;